Fidelity beats Vanguard in ER

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JustinTime
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Fidelity beats Vanguard in ER

Post by JustinTime »

https://www.fidelity.com/mutual-funds/i ... &gclsrc=ds

From the post:

In a head-to-head comparison of our 27 stock and bond index mutual funds and sector exchange-traded funds (ETFs) with comparable offerings from Vanguard:
All of our 16 index funds have lower expense ratios1 than their Vanguard counterparts, starting as low as .045%.2
Our 11 sector ETFs (commission-free for online purchase) have lower expense ratios than comparable Vanguard ETFs starting at .084%.
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nisiprius
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Re: Fidelity beats Vanguard in ER

Post by nisiprius »

Schwab did something like this a year or so go, revamping their line of index ETFs and giving all of them expense ratios that were 0.01% lower than Vanguard's. It's not of much significance except as a marketing move. I have some brand loyalty to Vanguard but as of 2016 the nice situation is that a number of big firms, including Schwab and Fidelity, are taking low-cost indexing seriously and offering competitive products.

Dropping the word "Spartan" from the fund names also suggests they want to send the marketing message that index funds are now mainstream for them, not just a sideline.

I don't think an 0.01% expense ratio matters much either way.

To tell the truth, a decade ago I worked for an employer with a Fidelity-managed 401(k) plan, so of course the skids were greased for me to become a Fidelity customer. In fact the only way I could get my holdings out of the 401(k) was first to roll them over into a Fidelity rollover IRA. If they had had their present lineup of index funds, with the set of choices and the expense ratios they have now, I probably would have shrugged and stayed with Fidelity. But now I am with Vanguard and I am certainly not going to move to Fidelity just to save 0.01% on the expense ratio.
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Shackleton
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Re: Fidelity beats Vanguard in ER

Post by Shackleton »

I agree that the numbers are so close as to be meaningless. But I keep my investments at Fido because of their better UI/UX. My mother has Vanguard accounts that I manage and the Vanguard site drives me crazy from a useability standpoint.
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Da5id
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Re: Fidelity beats Vanguard in ER

Post by Da5id »

Fidelity is a certainly a fine company with a nice web site.

I'd not bother moving my retirement funds from Vanguard to Fidelity for .005%-.01% expense ratio difference (differences for the total stock, international stock, and total bond fund, my main holdings, are all in that range). That is $50-$100 difference per million invested...

I'd be very hesitant to move taxable holdings, as they are less portable due to tax considerations (have gains I don't want to realize). And would be harder to move back if Vanguard ever got cheaper again, which they might well do.

I certainly give much of the credit for Fidelity's cheap index prices to Vanguard, as Vanguard clearly is the one driving costs down in the market. Others are coming along to stop the money from all flowing towards Vanguard...
malabargold
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Re: Fidelity beats Vanguard in ER

Post by malabargold »

Vanguard, and Bogle, didn't do it out of the kindness of their hearts - it's a business model, like Walmart.
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Re: Fidelity beats Vanguard in ER

Post by Da5id »

malabargold wrote:Vanguard, and Bogle, didn't do it out of the kindness of their hearts - it's a business model, like Walmart.
Walmart is trying to maximize profits for shareholders. Vanguard's model is somewhat different...
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Re: Fidelity beats Vanguard in ER

Post by malabargold »

How so?
Minimizing expenses,
Maximizing profits.
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Re: Fidelity beats Vanguard in ER

Post by jhfenton »

I'd consider a few factors beyond the top-line ER:

1. Securities lending revenue. Vanguard funds keep 100% of the securities lending revenue. Most other fund companies take a cut.
2. Vanguard's reported ERs are backwards-looking. They are what the fund cost last year--or for a new fund a high-end estimate. You may find out next year that you actually paid a bp or three less.
3. At Vanguard, low ERs are part of the fundamental model. At Fidelity, iShares, Schwab, they are merely current competitive necessities. I don't see that changing, but there's no guarantee that Schwab or Fidelity won't decide that they are losing too much on their loss-leader funds. In a retirement account, that's no big deal. In a taxable account, it's advantage Vanguard for me.

That said, I wouldn't hesitate to own a Fidelity, Schwab, or iShares fund if it was more convenient to do so. (I do own one iShares ETF at Vanguard, my only non-Vanguard holding outside my 401(k) and HSA.)
Last edited by jhfenton on Wed Jul 20, 2016 8:07 am, edited 1 time in total.
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Re: Fidelity beats Vanguard in ER

Post by Frugalman »

Vanguard is owned by its member funds, which operate on an "at cost" basis. This is a non-profit structure.
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Re: Fidelity beats Vanguard in ER

Post by Da5id »

malabargold wrote:How so?
Minimizing expenses,
Maximizing profits.
Where exactly do you think profits go in Vanguard, given the ownership structure?
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Re: Fidelity beats Vanguard in ER

Post by Lafder »

Fidelity solo401k fund ER beats Vanguard solo401k fund ERs. (VG only offers Investor class shares in solo401k)

(Plus Fidelity allows outside retirement accounts to be rolled into their solo401k and VG does not)

I really prefer VG's business model. And I even prefer their website. But it might be just that I am more used to it.

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qwertyjazz
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Re: Fidelity beats Vanguard in ER

Post by qwertyjazz »

Da5id wrote:
malabargold wrote:How so?
Minimizing expenses,
Maximizing profits.
Where exactly do you think profits go in Vanguard, given the ownership structure?
To the executives is the standard answer for any non-profit of that size.
Given executive capture of for profit companies and difficulty of shareholder control that might also apply to for profits
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Re: Fidelity beats Vanguard in ER

Post by Watty »

Da5id wrote:Fidelity is a certainly a fine company with a nice web site.
+1

And they have local offices in most large cities. I have accounts at both for historical reasons and have been happy with both and in my experience Fidelity has better customer service.

An analogy would be that Costco usually has great prices and quality but is you shop around you can usually find a better price but you would also have to research the quality and the details of the products to make sure that you are really getting a good deal. With Costco you can be pretty confident that you are getting a good overall deal even if it is not always the lowest possible price.

Good example needing to research the details with Fidelity is that they call their target date retirement fund "Freedom" funds but they use actively managed funds and have an ER of about 0.7%. Under pressure to to have lower cost offerings a few years ago they created "Freedom Index" funds using index funds with a better ER of around 0.16%. The problem is that their web site will lead you to the higher cost "Freedom" funds unless you actually know to look for the "Freedom Index" version.

Having pitfalls like this makes me cautious with Fidelity because I could miss something and when I am older or if my spouse needs to manage our finances keeping the costs low could be problems.
Last edited by Watty on Wed Jul 20, 2016 8:31 am, edited 2 times in total.
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Re: Fidelity beats Vanguard in ER

Post by pkcrafter »

Vanguard is set up as a not-for-profit company. Fidelity is trying to stop the bleeding as investors were moving to Vanguard. Spartan was a meaningless term to new investors, so they used the same wording as Vanguard because that's what investors kept asking for--index funds. These low-cost funds at Fidelity are no doubt operating at a small loss, but Fidelity wants to stop losing market share, so they've gotten aggressive. Where they can gain customers right now is better customer service. Vanguard is swamped with huge inflows and they haven't been able to keep up with customer service. I imagine Mr. Bogle is not too pleased with that.

Vanguard should follow John Bogle's words...
I had come to realize that effective, clear, honest, communications to our clients and crew were key to the success of our mission.
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Da5id
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Re: Fidelity beats Vanguard in ER

Post by Da5id »

qwertyjazz wrote:
Da5id wrote:
malabargold wrote:How so?
Minimizing expenses,
Maximizing profits.
Where exactly do you think profits go in Vanguard, given the ownership structure?
To the executives is the standard answer for any non-profit of that size.
Given executive capture of for profit companies and difficulty of shareholder control that might also apply to for profits
I don't begrudge them a reasonable salary, not sure what it is as I assume that it isn't public knowledge. But are you implying that the Vanguard management is getting anything like the profits of the Johnson family (Fidelity owners). Or the profits of a publicly traded bank/fund company? How do you know?

If Vanguard's management compensation is tied to goals like "reduce expense ratios", they are apparently earning their money. Before Vanguard, there was a history of mutual funds increasing AUM and also increasing their expense ratios despite alleged economies of scale. Vanguard has continuously pushed the trend in the opposite direction. I'll take it...
malabargold
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Re: Fidelity beats Vanguard in ER

Post by malabargold »

It's a low-cost, low-service business model.
Very similar to Walmart.

The full service brokerages are lowering fees and other discount brokers are matching or beating Vanguard on price and service.

Meanwhile Vanguard is now offering tiered services with fees for advice.

Reminds me of the flip-flop that happened at Motley Fool.
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Re: Fidelity beats Vanguard in ER

Post by qwertyjazz »

Da5id wrote:
qwertyjazz wrote:
Da5id wrote:
malabargold wrote:How so?
Minimizing expenses,
Maximizing profits.
Where exactly do you think profits go in Vanguard, given the ownership structure?
To the executives is the standard answer for any non-profit of that size.
Given executive capture of for profit companies and difficulty of shareholder control that might also apply to for profits
I don't begrudge them a reasonable salary, not sure what it is as I assume that it isn't public knowledge. But are you implying that the Vanguard management is getting anything like the profits of the Johnson family (Fidelity owners). Or the profits of a publicly traded bank/fund company? How do you know?

If Vanguard's management compensation is tied to goals like "reduce expense ratios", they are apparently earning their money. Before Vanguard, there was a history of mutual funds increasing AUM and also increasing their expense ratios despite alleged economies of scale. Vanguard has continuously pushed the trend in the opposite direction. I'll take it...
I do not know what they get and that is the point
I do not begrudge them it but this is like arguing that before Walmart stores did ...
It is a company with opaque actions
I use them and I appreciate its existence and I appreciate Bogle in the past but I do not know how many tens or hundreds of millions are made by the current iteration of executives. I just have trouble seeing that any different than the Johnson family making money.
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Re: Fidelity beats Vanguard in ER

Post by randomizer »

Shackleton wrote:I agree that the numbers are so close as to be meaningless. But I keep my investments at Fido because of their better UI/UX. My mother has Vanguard accounts that I manage and the Vanguard site drives me crazy from a useability standpoint.
It's not so great, but they have a sweet iOS app. Probably doesn't help your mom though...
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Re: Fidelity beats Vanguard in ER

Post by Engineer250 »

Watty wrote:I have accounts at both for historical reasons and have been happy with both and in my experience Fidelity has better customer service.
I've done rollovers from Fidelity to Schwab, from Schwab to Vanguard, from Vanguard to TSP (and 2 other non-name brand companies). Fidelity was by far the easiest to deal with even though they were losing the money I had with them. Schwab of 10+ years ago was actually difficult to get the money INTO. And while they weren't too hard to get money out of more recently, they also charged me a $50 fee, I assume for closing my account, that I didn't see until I was recently checking my statements to try to figure out what years I made IRA contributions. Vanguard was kind of annoying in trying to get money to the TSP but it turned out alright in the end. I was also super excited when my former 401k moved from Schwab to Vanguard only to discover the funds in the normal 401k were none of their "total market" funds with low ER, but a bunch of other random funds. That may be the fault of my former executives however. I'll stay with Vanguard because I am lazy, but wouldn't have had a problem staying with the prior two if my 401k wasn't bouncing around so much.
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JustinTime
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Re: Fidelity beats Vanguard in ER

Post by JustinTime »

+ 1 main reason I am at FIDO is my employers 401k and the fact that Vanguards site is so bad.
Shackleton wrote:I agree that the numbers are so close as to be meaningless. But I keep my investments at Fido because of their better UI/UX. My mother has Vanguard accounts that I manage and the Vanguard site drives me crazy from a useability standpoint.
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Re: Fidelity beats Vanguard in ER

Post by ruralavalon »

Shackleton wrote:I agree that the numbers are so close as to be meaningless. But I keep my investments at Fido because of their better UI/UX. My mother has Vanguard accounts that I manage and the Vanguard site drives me crazy from a useability standpoint.
I love your avatar. I just finished reading Endurance, a great book about Shakleton's Antarctic expedition.

I agree that the 0.01% difference in expense ratio is meaningless except as a marketing move. The Vanguard website is fine by me, the website is one of the reasons I initially chose to go with Vanguard rather than Fidelity.
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Re: Fidelity beats Vanguard in ER

Post by bondsr4me »

I have a question (and yes this is a serious question) for any/all forum readers...

Is there anyone who really DOES like Vanguard's website?
I have a joint account, an IRA account and my wife's IRA account at Vanguard.
We also have accounts at Schwab, Fidelity and TDAmeritrade.

I will be the first one to admit that VG's site is plain and simple. But ya know, I do kinda like that.
It's not cluttered with a lot of stuff that is not useful to a "buy and hold" type "investor".
For trading, VG is just not the place to be...but that's OK for me.

For my intended purposes, FIDO, Schwab and TDA suit the purpose really well.

To sum, I like them ALL. So the final factor (to me) is cost.
VG nudges ahead of the others....and I do like VG's business model.

Have a great day (trading...just kidding) all you BH'ers!

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Re: Fidelity beats Vanguard in ER

Post by Blister »

Agree with Bondsr4me I like the Vanguard no frills site. In the process of moving my Schwab IRA to Vanguard. Have a taxable account with TD America and it is much too busy. Seems like they are trying to get me to trade more with all their bells and whistles. Have had Roth IRAs with Vanguard for few years and quite happy with their service.
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Re: Fidelity beats Vanguard in ER

Post by danwhite77 »

Bill McNabb recently had a great line about this when another firm dropped expenses on some products below Vanguard's. His line was something like:
If you beat us on price today, you better be prepared to beat us on price tomorrow because we set our prices based on cost, not as a marketing gimmick.
That's nice that Fidelity cherry picked some funds that are a trifling amount less expensive than Vanguard, but I'd put a lot of money on Vanguard's fees for all funds being much lower than Fidelity's.

And let's remember that we owe Jack Bogle a huge debt of gratitude. If not for Vanguard, firms like Fidelity would still charge a huge ER for even the most basic funds.
"While some mutual fund founders chose to make billions, he chose to make a difference." - Dedication to Jack Bogle in 'The Bogleheads' Guide to Investing'.
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Re: Fidelity beats Vanguard in ER

Post by Christine_NM »

I would like to see a price tag for Fidelity and Vanguard's UI -- a user expense ratio. Then I will know which I like better. I've used both and I was a UI developer for almost 30 years (anybody remember Motif?).

I can understand the visual appeal of Fidelity over Vanguard but when you think of a UI as a hard sell the difference between F & V is clear, at least to me.

As a long-term investor I am still making money from the checks I used to send in to Vanguard in those postpaid envelopes. Anybody remember those? Those envelopes, not a glam UI, put us in Flagship status.
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mervinj7
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Re: Fidelity beats Vanguard in ER

Post by mervinj7 »

Previous discussion on the same topic:
viewtopic.php?f=10&t=194206&start=100
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House Blend
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Re: Fidelity beats Vanguard in ER

Post by House Blend »

All it takes is one capital gains distribution (in a taxable account) to wipe out several years worth of ER savings.

And yes, Fidelity's index funds do occasionally have these distributions.

Vanguard index funds generally do not, due to the way they share gains between ETF and mutual fund share classes.
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Re: Fidelity beats Vanguard in ER

Post by cmf »

Marketing yourself as having fees equal to or better than Vanguard could have a couple benefits for Fidelity. First, it could encourage people contemplating a move to Vanguard to stay put. Second, it could encourage people not with Vanguard to move to Fidelity. The latter is what happened in our case. We have access to both TIAA-CREF and Fidelity in our plan. Both, in terms of fees, were a wash for us. That is until Fidelity lowered their fees, now we're moving all our stuff from TC to Fidelity.

I've got a small Roth at Vanguard. I really like the company model and after retirement may end up moving our holdings to Vanguard. But I find their website lacking. I had to send an email to tech support asking how to buy mutual funds out of the Federal Money Market Fund that was created when I added money. I've worked in the computer business for 16 years. I've never had to email tech support about how to use a website... Once you know how to do it, of course it's easy. :)
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Re: Fidelity beats Vanguard in ER

Post by ruralavalon »

bondsr4me wrote:I have a question (and yes this is a serious question) for any/all forum readers...

Is there anyone who really DOES like Vanguard's website?
I have a joint account, an IRA account and my wife's IRA account at Vanguard.
We also have accounts at Schwab, Fidelity and TDAmeritrade.

I will be the first one to admit that VG's site is plain and simple. But ya know, I do kinda like that.
It's not cluttered with a lot of stuff that is not useful to a "buy and hold" type "investor".
. . . . .
I like Vanguard's website. The two reasons I decided to go with Vanguard in the first place were it's website and it's very large selection of low ER mutual funds.

The website groups funds offered by asset type, so you can quickly find funds of the the asset type you are looking for. On the website each fund has a page that clearly lists all fees and expenses for a given fund on a single page. On the website each fund has a "compare" tab, that lets you quickly and easily compare funds of any asset type to decide which specific fund might be better for your needs.

I don't trade, so I just don't care about a smooth brokerage feature. Our joint taxable account holds only Vanguard stock index funds so doesn't need a brokerage feature. I have a brokerage feature in my rollover IRA simply to hold some individual Treasury bonds.
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Re: Fidelity beats Vanguard in ER

Post by Thrifty Femme »

nisiprius wrote:Schwab did something like this a year or so go, revamping their line of index ETFs and giving all of them expense ratios that were 0.01% lower than Vanguard's. It's not of much significance except as a marketing move. I have some brand loyalty to Vanguard but as of 2016 the nice situation is that a number of big firms, including Schwab and Fidelity, are taking low-cost indexing seriously and offering competitive products.

Dropping the word "Spartan" from the fund names also suggests they want to send the marketing message that index funds are now mainstream for them, not just a sideline.

I don't think an 0.01% expense ratio matters much either way.

To tell the truth, a decade ago I worked for an employer with a Fidelity-managed 401(k) plan, so of course the skids were greased for me to become a Fidelity customer. In fact the only way I could get my holdings out of the 401(k) was first to roll them over into a Fidelity rollover IRA. If they had had their present lineup of index funds, with the set of choices and the expense ratios they have now, I probably would have shrugged and stayed with Fidelity. But now I am with Vanguard and I am certainly not going to move to Fidelity just to save 0.01% on the expense ratio.
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Re: Fidelity beats Vanguard in ER

Post by brennok »

I went Vanguard mainly since it was the name everyone seemed to suggest on the various forums and sites I frequent. I was only funding a Roth IRA at the time, but it seemed the easiest to get good advice on when I have questions I can't find the answer to.

Now that it is time to handle an inherited 401K, I do worry based off a few posts about things that could go wrong and things that have for others. It also doesn't help I couldn't find the option to create an account for the inherited IRA or the necessary paperwork for the transfer since I am also considering a partial conversion to inherited Roth IRA at the same time.
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